Modern FP&A teams are automating the rolling forecast process and ditching the outdated static forecasting method.
Long ago, the FP&A forecasting process moved from a static forecast exercise to dynamic advantage. Trying to adapt to changing business needs requires the ability to quickly move money and resources to areas where they’ll do the most good. And, because allocations fixed in a January annual plan are invalid just a few weeks or months later, the dynamic forecasting model eliminated that frustration.
Now, more businesses are also moving away from a static forecasting method. Those fixed projections just aren’t helpful to your business, especially in today’s fast-moving world. Even the most predictable business models are impacted by outside forces, such as supply chain disruptions, departing workers, changing customer demands, or competitive moves. So, it’s difficult to manage a business, or even a department, with a static forecast that quickly goes stale.
Modern businesses are adopting dynamic, rolling forecasts to adjust their predictions more often. By reevaluating forecasts every 30 to 90 days and providing visibility with a longer runway, a rolling financial forecast can better reflect what is happening in the business and the market.
Rolling Updates Drive a Rolling Forecast
With a rolling forecast model, you revisit and adjust forecast assumptions at set intervals. Regardless if your financial forecasts look out a month, quarter, or year, they’re all updated each interval by the rolling forecast software. This gives you a chance to incorporate recent results, competitive changes, or new information to improve the accuracy of your forecasts.
A rolling financial forecast is also untethered from fiscal or tax year cycles. This puts rolling forecasts more in line with today’s business environment of uncertainty and constant change. But, while they may seem daunting, rolling forecasts are easy to incorporate into your current FP&A process flow while helping transform your business into an agile, strategic competitor that acts with more confidence.
Benefits of Rolling Forecast Models: Agility for Adapting to Constant Change
Traditional forecasting gives you a static forecast on which to base plans, budgets, and strategic decisions over the next few months or quarters. But this blocks you from continually adapting your business to the current reality. The result is a reactive business that scrambles to identify and adjust to even the smallest of changes.
If 2020 taught us anything, it’s that change is inevitable and can be enormous. A static forecasting method doesn’t work in a world that can change overnight. In order to make sound financial decisions, you need up-to-date insights based on up-to-date forecasts with short and long term visibility. Current information gives you the confidence to quickly reallocate resources to address disruptions in supply chains, labor shortages, or anything else. But, to do so also requires the agility that comes with rolling forecasts.
Rolling Forecast Advantages: Current Insights for Better Strategic Decisions
Rolling forecasts inform budget creators with current insights so they can adjust and reallocate financial resources as business strategies demand. More accurate forecasts also enable business leaders to see and recognize the impact of market changes before it’s too late, giving them time to adjust strategies today instead of next month or quarter.
Sports fans know, if you see the defense shift strategy, you don’t run the same play knowing it’s going to fail. You adjust, adapt, and shift your strategy to fit what’s going on right now. The same holds true in business, and it’s up to the FP&A forecasting process to keep the business informed with current, accurate information. The business can quickly adjust their own strategies, and see why businesswide strategy changes are being made. It not only puts your decision-makers in the game, it eliminates their need to protect budgets because they see the strategic value in how resources are allocated.
Transform How Your Business Forecasts with a Rolling Forecast Process
Mark Cohen, VP of Finance at Thule, used rolling forecasts as a way to transform how their business operates. “We have a forecast that people can actually sit down and discuss with better visibility into important issues related to customers, promotions, and expense management, among others.”
You don’t need to spend weeks producing financial forecasts which are quickly ignored, or worse, followed blindly as your business struggles to adapt. Instead, spend your valuable time raising the financial IQ of the business so they can make better decisions.
A modern business can’t be well-run on static forecasts built on static spreadsheets. For today’s businesses, rolling financial forecasts help you more accurately allocate future funds, and give you the insights needed to quickly respond to change.
If you’re stuck on a static forecasting method, Planful’s FP&A software can help. Our rolling forecasts capabilities let you forecast continually with ease. You can automatically roll-forward current forecasts to streamline and speed new forecast creation. It adds intuitive collaboration tools so you can work alongside the business to inform budgets, build plans, and drive strategic decisions. And, it brings flexible workflows to standardize budgeting and financial forecasting processes, keep everyone in sync and on deadline, and reinforce reviews and approvals for increased accuracy.